NASDAQ:AUDC) and its trend of ROCE, we really liked what we saw.” data-reactid=”28″>To find a multi-bagger stock, what are the underlying trends we should look for in a business? Amongst other things, we’ll want to see two things; firstly, a growing return on capital employed (ROCE) and secondly, an expansion in the company’s amount of capital employed. Ultimately, this demonstrates that it’s a business that is reinvesting profits at increasing rates of return. So when we looked at AudioCodes (NASDAQ:AUDC) and its trend of ROCE, we really liked what we saw.
Return On Capital Employed (ROCE): What is it?
Just to clarify if you’re unsure, ROCE is a metric for evaluating how much pre-tax income (in percentage terms) a company earns on the capital invested in its business. The formula for this calculation on AudioCodes is:
View our latest analysis for AudioCodes ” data-reactid=”38″> View our latest analysis for AudioCodes
report for AudioCodes.” data-reactid=”51″>In the above chart we have measured AudioCodes’ prior ROCE against its prior performance, but the future is arguably more important. If you’d like to see what analysts are forecasting going forward, you should check out our free report for AudioCodes.
What Does the ROCE Trend For AudioCodes Tell Us?
We’re glad to see that ROCE is heading in the right direction, even if it is still low at the moment. The numbers show that in the last five years, the returns generated on capital employed have grown considerably to 9.5%. Basically the business is earning more per dollar of capital invested and in addition to that, 71% more capital is being employed now too. So we’re very much inspired by what we’re seeing at AudioCodes thanks to its ability to profitably reinvest capital.
The Bottom Line On AudioCodes’ ROCE
All in all, it’s terrific to see that AudioCodes is reaping the rewards from prior investments and is growing its capital base. Since the stock has returned a staggering 882% to shareholders over the last five years, it looks like investors are recognizing these changes. In light of that, we think it’s worth looking further into this stock because if AudioCodes can keep these trends up, it could have a bright future ahead.
4 warning signs for AudioCodes that we think you should be aware of.” data-reactid=”56″>On a final note, we’ve found 4 warning signs for AudioCodes that we think you should be aware of.
list here.” data-reactid=”57″>While AudioCodes may not currently earn the highest returns, we’ve compiled a list of companies that currently earn more than 25% return on equity. Check out this free list here.
Get in touch with us directly. Alternatively, email [email protected].” data-reactid=”58″>This article by Simply Wall St is general in nature. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.
Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email [email protected].
